WASHINGTON—A gauge of U.S. business prices rose in May as energy prices jumped, a sign inflation is stabilizing.
The producer-price index for final demand, which measures prices that businesses receive for their goods and services, increased a seasonally adjusted 0.5% last month from April, the Labor Department said Friday. That was the largest gain since September 2012.
Core prices, which exclude volatile food and energy categories, rose a more modest 0.1%.
Economists surveyed by The Wall Street Journal had expected overall prices to rise 0.4% and core prices to advance 0.1%.
Even with the latest gain, price pressures remain muted. From a year earlier, overall producer prices are down 1.1%, the fourth straight decrease, and core prices are up only 0.6%.
"It's clear that underlying price pressures at the producer level, at least for goods, are very low, thanks to slow wage gains, weak materials prices and the strong dollar," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note to clients.
The producer-price index, like most measures of inflation, started falling fairly steadily around the middle of last year. The decline largely reflected the falling cost of a barrel of crude oil, which topped $ 100 over the summer but then tumbled below $ 50 earlier this year. Prices have since firmed near $ 60.
Higher energy prices—especially gasoline—accounted for the bulk of the increase for the overall index last month.
Producer energy prices jumped 5.9% in May from April, the biggest increase since the Labor Department started tracking the figure in December 2009. Energy prices are down 19.5% on the year. Gasoline prices climbed 17% last month.
Food prices increased 0.8% last month but are down 3.3% over the year. Chicken egg prices skyrocketed 56.4%, the biggest increase since the Labor Department started tracking the commodity in 1937. The big jump follows an outbreak of avian influenza in the U.S., which has stricken tens of millions of birds and stoked worry of tight egg supplies.
Elsewhere, price pressures are limited. One reason: A strong dollar has held down the price of goods from overseas. Import prices for autos, natural gas, nonfuel industrial supplies and capital goods all fell last month, according to a separate Labor report released Thursday.
When excluding food, energy and trade services, the producer price index fell 0.1%.
The price index for intermediate demand, which tracks costs of products used as inputs for production, rose 1% in May but is down 7% from a year earlier.
The Federal Reserve is closely tracking inflation as it considers when to lift interest rates from near zero, where they have held since December 2008. The central bank's preferred inflation gauge, the price index for personal consumption expenditures, has undershot a 2% target for three years.
Along with PPI, other inflation gauges have perked up. The consumer-price index, which reflects what Americans pay for everything from breakfast cereal to medical care, rose a seasonally adjusted 0.1% in April from a month earlier, the third consecutive monthly increase, the Labor Department said last month. Core prices climbed 0.3%, the largest increase since January 2013.
"We expect PPI inflation to continue to firm, as we believe the negative contributions from the energy component are largely behind us, and we think that the effects of past dollar appreciation on domestic inflation are beginning to wane and should diminish further in the third and fourth quarters," said Rob Martin, economist at Barclays.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
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